GSI Commerce, a division of e-Bay that handles online shipping for 70 brands including Godiva, Aéropostale, and Estée Lauder, has been counting workers’ steps and even tweaking the way it prints labels with a single goal: Push back the cutoff time for Christmas delivery by 60 minutes. This year, GSI’s customers let shoppers order as late as 11 p.m. on Dec. 22 and still get their orders by Christmas Eve. That’s 8 more hours than shoppers get on Amazon.com, and an hour later than GSI’s deadline last year. “It’s beyond critical,” says the COO of one on-line retailer. “Having a few hours over a competitor could be a seven-figure event.”
As soon as last Christmas ended, GSI’s OM execs began huddling with customers and UPS to figure out how to speed up the time it takes for an order to be processed. GSI spent more than $25 million to improve its operations and speed since then. One of the OM changes: saving steps for employees–who can walk nine miles a day–by putting the most popular goods closest to the people who pick them. This cut employees’ walking time by 60%.
The company then placed 7,000 big box storage containers closer to the front of the warehouse. To figure out what to put in the boxes, GSI’s OM team tracked order patterns and worked with retailers to know what is being promoted heavily. Those calculations were rerun every hour.
To further cut down walking time, GSI moved smaller storage boxes on their shelves closer together. Fire insurers required the warehouses to maintain a few inches of space between the boxes so that water from overhead sprinklers can drain down between them. Across miles of shelves, those gaps add up. So GSI decided to drill holes into the boxes, proving that could accomplish the same firefighting goal as the spaces.
Discussion questions:
1. Why was it important for GSI to improve its warehousing operations?
2. How did GSI decide what processes to change?